What Is Credit Card Cash Withdrawal? A Complete Guide.

Are All Credit Cards Eligible For Cash Advance?

• The influx of innumerable credit cards has fully transformed the scene of money lending.
• The distinct credit card cash withdrawal feature generally referred to as the credit card cash advance enables money withdrawal from a bank ATM using your credit card.
• You can get instant funds without submission of necessary documents or await approval of the application made in the bank.
• A fixed amount of cash can be withdrawn based on specific terms and conditions, which have to be duly repaid within a certain timeframe, coupled with an interest and a few other charges.

How Does Credit Card Cash Withdrawal Work?

1. During a financial crisis, using a credit card to pull out cash is an option almost fit for a king.
2. However, it can only end up mounting your financial load.
3. When a regular credit card is used for making a purchase, you’re billed as per the next billing date.
4. Conditional on the date of your purchase, a particular interest-free period is normally extended by the bank.
5. This period can vary from 15 – 45 days, 20 – 50 days, depending on the company’s policies.
6. However, this isn’t the case with the credit card cash withdrawal feature.
7. When you take out cash, it results in the initiation of a cycle of repayment, which is different from the usual credit card purchase cycle.

Is There Any Free Credit Period?

• The answer is no when it comes to credit card cash withdrawal.
• Interest calculation begins from the first day itself. You will also incur a finance charge and transaction fee.
• These compensations vary in different banks.
• Ideally, they range anything from 2.5 to 3 percent of the amount you withdraw or a set minimum amount no more than INR 300 to INR 500 in the form of an advance fee.
• It is fixed at the bank’s discretion.
• Customers are supposed to pay the amount higher between the two.
• Even the interest or finance charge levied on a credit card cash withdrawal is concerning credit card purchases made.
• The cash advance fee is reflected in the credit card statement of the subsequent month.
• Prudent use of a credit card enables you to get the most out of interest rates and cash advance fees.
• Furthermore, you’re allowed to repay your outstanding dues through flexible EMIs.

Withdrawal Limit

1. When you draw out cash using your credit card, there’s a definite cash limit, which is usually 20 to 40 percent of your total credit limit.
2. This is known as the cash advance limit.
3. While the credit limit is the amount up to which you can make purchases on your card, the cash advance limit signifies the amount you can withdraw at most.
4. For instance, in case you have a credit card with a total limit of INR 100,000, your cash advance limit can vary from INR 20,000 to INR 40,000.
5. The residual amount can be consumed for normal credit card transactions.

How Is Cash Withdrawn Using a Credit Card?

• Note that the process of taking out cash on a credit card can be as effortlessly done as withdrawing money from an ATM with a debit card.
• All you need is to walk into a nearby ATM kiosk with your credit card and adhere to the instructions on how to withdraw cash.
• Also, generally, withdrawals are effective at any bank ATM regardless of the bank that issued the credit card.
• But, some banks occasionally charge a cash advance fee for external banks.
• At the same time, several banks limit such cash transactions by putting a cap on the maximum and minimum amounts of cash that can be withdrawn per day or per ATM transaction.
• Therefore, knowing the terms and conditions is imperative to avail of the credit card cash withdrawal facility.
• Moreover, it’s important to be aware of the available cash limit and prevent any excess spending.
• If any over-limit transaction is done successfully, the bank will simultaneously impose an over-limit fee apart from the customary finance charges.

How Does the Credit Card Cash Advance Feature Impact Your Credit Score?

1. When you withdraw cash advances from your credit card, it won’t be separately reported to credit rating agencies.
2. When you fail to pay back the whole outstanding due, it will then be reported in its entirety.
3. Therefore, picking up cash from your credit card will not directly influence your credit score.
4. But, on the account of steep interest rates accumulating every day with additional charges, it may be troublesome for you to keep pace with the stipulated monthly payments.
5. Failing to pay the minimum amount due will affect your credit score and reflect adversely in the credit report.
6. So, to ensure your credit score remains spotless, you will have to make the payments on time.

What Are the Advantages of Credit Card Cash Withdrawal?

• Mentioned below are some of the benefits of credits card cash withdrawal:

You Get Instant Cash

1. The principal advantage of the facility lies in getting instant liquid cash.
2. You have round-the-clock access to cash, as all ATMs are open 24X7 in all nooks and crannies inside and outside the country.

No Requirement For Any Documentation Or Approval

• To avail of the credit card cash advance facility, you don’t need any approval from the issuing bank or submission of multiple documents, unlike personal loans or other loans.
• Only your credit card needs to be used to avail cash from an ATM.

Pliable limits

1. If you maintain a decent track record on your credit card spending, such as consistent patterns of expenditure, no late payments, no defaults – you are eligible for limit enhancement on your card.
2. Once the bank ratifies your request for a credit limit enhancement, the limit to withdraw cash will automatically rise.

What Are the Disadvantages of Credit Card Cash Withdrawal?

Mentioned below are some of the disadvantages of credits card cash withdrawal:

Fee & Charges

• At all times you avail the facility, a cash advance fee is levied, which, in turn, sucks in more finance charges payable from the transaction date, up until repayment is made in totality.

Interest Rate

1. Even though credit card cash advance attracts an interest rate similar to that charged for usual card transactions, the interest in the former case is imposed from the transaction date.
2. It continues running up until full payment is made.
3. This makes the whole business financially draining.

The Ineffectiveness Of Reward Points

• Transactions carried out via credit card cash withdrawal aren’t eligible for availing of accumulated reward points.
• Be that as it may, even big transactions don’t qualify the reward points you collected for redemption.

The Burden Of No Interest-Free Period

1. One more bearing that keeps soaring your financial liability is that interest is levied right from the transaction date.
2. There’s nothing like an interest-free period as far as cash advances are concerned.
3. What’s more, the interest charges keep piling up until outstanding dues are completely paid off.

The Poor Impact On Your Credentials To Lenders

• Many times, it’s a bad idea to go for credit card cash withdrawal.
• This is because the lender identifies you as a risky borrower.
• If your lender comes across instances where you’re seen to be taking cash advances, odds are you will be red-flagged by their risk models.
• A high-risk borrower implies your ineligibility to get credit in the future.
• At the same time, you may find it challenging to get going with a new credit line or be charged a higher interest rate to your outstanding balance from here on out.

A Potential Negative Influence On Your Credit Score

1. Your credit card cash advance adds to the outstanding dues on your card debt, which eventually surfaces on your credit rating reports.
2. If your card has got a higher credit utilisation ratio and credit card debt in contrast to the total available credit your card has, you’ll invariably have a lower credit score.
3. A high balance compared to the credit limit coupled with simultaneous cash advances can drastically dwindle your credit score.

How to Effectively Plan to Get Cash from a Credit Card?

1. However reckless it may appear, almost all credit cards allow you to acquire cash advances.
2. Following are a few steps you may like to mull over if you’re still inclined to go ahead with a cash advance:

Deliberate On Other Options

• As already stated, credit card cash advances aren’t favorable options.
• Alternatively, you may opt for personal loans, gold loans, or credit cards with zero or low annual percentage rate (APR).

Invest Time To Grasp The Terms And Conditions

1. Cash advances hold the possibility of quickly becoming too expensive to handle, with all the associated charges in tow.
2. So it’s better to be familiar with what’s in store for you beforehand.

Think Over The Repayment Plan Carefully

• Planning and executing the repayment of a cash advance systematically is crucial.
• You need to find out how much extra outlay you have to shell out for the cash amount you intend to borrow.

Opt For A Quick Repay

1. You need to always need to keep in mind, any credit card cash advance entails attracting interest straightaway.
2. So, it’s suggested to pay back the debt as soon as you can.

Also Read:

1) Most Common Credit Card Errors & Ways to Fix Them.
2) Top 10 Mistakes You Should Avoid While Using a Credit Card.
3) Credit Lock vs Credit Freeze: What's the difference?

FAQs

Q- Can I avail of cash advance from all credit cards?

1. You won’t find all credit cards to dispense the cash advance feature.
2. The issuing bank only decides whether to provide the facility with a certain card or not.

Q- How can I get to know the cash limit my credit card offers?

• When you receive the welcome kit for your credit card, the cash limit will be displayed on it.
• Also, you can log in to your credit card net banking account or call up your banks’ customer care helpline to be aware of the total and available cash limit.

Q- Can the cash advance feature impact my credit score?

1. Your credit card cash advance adds to the outstanding dues on your card debt which eventually surfaces on your credit rating reports.
2. If your card has got a higher credit utilisation ratio and credit card debt in contrast to the total available credit your card has, you’ll invariably come down with lower credit scores.

Q- How to only make credit card cash advance payments?

• If your credit card outstanding due carries only a cash advance, any payment made will be taken into account as a cash advance.
• When the outstanding dues consist of other expenses, for example, card transactions, balance transfers, EMIs, etc.
• The bank will receive the payment and adjust in sequential order starting with the minimum amount due that takes in 5% outstanding, applicable taxes, loan EMIs, interest charges, balance transfer outstanding, and in the end, cash advance.
• Thus, the payment towards cash advance will be accepted once all other dues are cleared.